State audit finds financial mismanagement in Barbourville

The city of Barbourville and some of its boards bought products without obtaining bids; paid far more for land than the assessed value; and hired contractors for work that city employees could have done far cheaper, according to an audit released Tuesday.

The audit also found that Mayor David Thompson influenced the hiring of his wife at the city-run water park, and that the water park did not file state sales tax returns on concessions while she was in charge.

State Auditor Adam Edelen's office started the special examination of the city and its boards last summer at the request of five of the city's six city council members.

Council members had expressed concern about activities that could indicate mismanagement, according to the audit.

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The audit, released Tuesday, covered July 2007 through August 2013 and identified a number of problems, including lax controls and oversight that led to financial mismanagement and abuses.

Edelen's office referred some findings to Attorney General Jack Conway's office and the state Department of Revenue, and recommended that others be referred to a regional ethics board.

"Small Kentucky communities, which are the lifeblood of our commonwealth, need to be responsible stewards of extremely limited yet important resources," Edelen said in a statement.

Thompson, who has been in office since January 2007, did not return a call seeking comment.

However, he said in a letter to the auditor's office that he accepted all 28 findings and would implement the document's recommendations to fix problems.

For instance, Thompson said sales tax returns had been filed, and that he would give up his voting slot on the local tourism and recreation boards.

The recreation board hires someone to manage concessions at city facilities, including the water park. In 2007, Thompson "asserted influence" over the process, saying his wife, Wendy, would be the manager, and she kept the job each year from then through 2012, the audit said.

The procurement of management services was not subject to bids during that time.

Revenue from concession at the water park and another park was not reported to the board during that time, and Thompson and his wife also didn't give the information to auditors, the report said.

"The public has no idea how much money these park concessions made or how it was spent," Edelen said. "Parks may seem like small potatoes to some, but they are important community assets."

Other findings in the audit included:

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■ Thompson and others gave out free passes to the water park, which they had no authority to do, costing the city revenue.

■ The city paid a contractor more than $73,000 in fiscal 2007 and 2008 for work such as pruning trees, mulching and painting, which city employees could have done. The city also paid others, including a plumber and an electrician, for work that city employees could have done.

■ Thompson certified that people who were required to work in community-service jobs as part of receiving public assistance worked at the recycling center, when in fact auditors did not find them there when they visited. Many of the people had their children at Thompson's wife's daycare facility, which received state payments for caring for them.

■ Thompson's wife might have underreported the number of people working in concessions at the water park and ball park, which would have increased her profit.

■ The city failed to seek bids on $81,239 worth of asphalt in fiscal 2013 and more than $300,000 in fuel in fiscal years 2012 and 2013.

■ The tourism board accepted a low bid on a project to renovate a house for its offices, even though the bid came in three days after the deadline. That increased the risk of fraud and gave an unfair advantage to the winning bidder, a local company; the two other bidders were not local companies, the audit said. The winning company, which was not named, later submitted a request for a higher payment, claiming conditions in the house were worse than expected. The tourism board approved the increased payment.

Auditors said the request for significantly more money seemed unreasonable, given that the contractor had done work on the building previously and so should have known the conditions.

The tourism board also had to pay for more work after the final payment to the contractor, suggesting the company had not finished the work, the audit said.

■ In another case, the tourism board hired a Corbin company for a fencing project even though its bid was higher than one from an out-of-town company.

■ The city paid $15,000 for a piece of land in 2007 that was assessed for tax purposes at $2,000, and in 2010 paid $12,000 for a tract that had been valued at $2,500. The city did not get appraisals on either piece of property, the audit said.